Benefits, Weaknesses, Opportunities and Risks of SaaS
adoption from Iranian organizations perspective
Tahereh Rostami1, Mohammad Kazem Akbari2and Morteza Sargolzai Javan3 1Taali University of Technology
Computer Engineering and IT Department Qom, Iran
msrostami.tahereh@gmail.com 2Amirkabir University of Technology Computer Engineering and IT Department
Tehran, Iran akbarif@aut.ac.ir
3Amirkabir University of Technology Computer Engineering and IT Department
Tehran, Iran msjavan@aut.ac.ir
Abstract
Software as a Service (SaaS) is a new mode of software deployment whereby a provider licenses an application to customers for use as a service on demandv SaaS is regarded as a favorable solution to enhance a modern organization’s IT performance and competitiveness which helps organizations avoid capital expenditure and pay for the functionality as an operational expenditurev SaaS has received considerable attention in recent years, and an increasing number of countries have consequently promoted the SaaS marketv However, many organizations may still be reluctant to introduce SaaS solutions mainly because of the trust concern they may perceive more risks than benefitsv This paper focuses on the analysis of Iranian organizations understand from the benefits, weaknesses, opportunities and risks of SaaS adaptionv
Keyworde: Cloud services, Software as a Service (SaaS), Adoption, Binomial test
1. Introduction
Effectively making use of Information technology (IT) can constitute a sustainable source of an organization’s competitivenessv Cloud computing has become a topic of tremendous interest as organizations struggle to improve their IT performancev Cloud services can be viewed as a cluster of service solutions based on cloud computing, which involves making computing, data storage, and software services available via the Internetv According to the UvSv National Institute of
environment [2, 4]v Some surveys related to cloud services have enhanced our understandings of the factors involved in adoption of SaaS solutionsv For example, in The Adoption of Software as a Service in Small and Medium-Sized Businesses (IDC #205798, 2007), the report remarked that while SaaS has strong growth potential, small and medium-sized businesses have not been adopting SaaS as quickly as originally anticipatedv Concern about data security is the factor most frequently cited as discouraging the use of SaaSv This report also revealed that marketing efforts for the SaaS adoption should highlight the issue of trust by enhancing users’ perceived benefits as well as decreasing users’ perceived risksv The rest of this paper is organized as followsv In Section 2, presents the related workv In Section 3, the SaaS concept has been describedv In Section 4, Effective factors on adoption of cloud is detectedv In Section 5, the methodology has been definedv
2. Related Works
In [16], presumed that SaaS adoption is a trust issue involving perceived benefits such as pay only for what you use, monthly payments, costs and perceived risks such as data locality and security, network and web application securityv The paper has proposed a solution framework that employs a modified DEMATEL approach to cluster a number of criteria (perceived benefits and perceived risks) into a cause group and an effect group, respectivelyv In [17], attempts to develop an explorative model that examines important factors affecting SaaS adoption, in order to facilitate understanding with regard to adoption of SaaS solutionsv An explorative model using partial least squares (PLS) path modeling is proposed and a number of hypotheses are tested, which integrate TAM related theories with additional imperative constructs such as marketing effort, security and trustvin [12], analyzes the opportunities such as Cost advantages, Strategic flexibility, focus on core competencies and risks such as Performance, Economic, Managerial, associated with adopting SaaS as perceived by IT executives at adopter and non-adopter firmsv Also developed a research model grounded in an opportunity-risk frameworkv
In [18], reports on research into SaaS readiness and adoption in South Africa as an emerging economyv Also discussed are benefits of Immediacy, Superior IT Infrastructure, Software Maintenance and Challenges of limited customization, integration Problems, Perceived Security concernsv
3. Software as a Service
SaaS is an outsourcing innovation that transforms IT resources into continuously provided services [5]vThat is, SaaS delivers an application’s functionality through the Internet as a service and thus, eliminates the need to install and run the software on the client’s computer [3,6]v Therefore, customers only pay for their use of the software because there are no licensing fees [7, 8]v This unique feature of SaaS has allowed the SaaS market to grow six times faster than the packaged software market and is expected to facilitate further development of SaaSv According to a study by Gartner, SaaS is predicted to become increasingly important in most enterprise application software (EAS) marketsv The global SaaS market is expected to reach 12v1 billion USD by 2014, reflecting a compound annual growth rate of 26%v This rapid growth of the SaaS market has had considerable influence on the software market [9]v However, despite this rapid growth of the SaaS market, some of countries with SaaS markets in their initial stages have faced many problems in SaaS adoptionv According to [9], in a new SaaS market, inducing SaaS adoption is likely to be difficult due to major inhibitors, such as limited integration and flexibilityv
In fact, not everyone is positive about SaaS adoptionv Some companies and market researchers are particularly skeptical about its viability and applicability in strong EAS markets such as ERPv The main adoption barriers are said to be reliability issues (ivev, stable access to services), information security and privacy concerns (ivev, security breaches and improper protection of firm data), and process dependence (ivev, performance measurement and service quality) [10]v Also there are vulnerabilities in the applications and systems availability may lead to the loss of valuable information and sensitive data or may be the moneyv These concerns discourage the enterprises to adopt the SaaS applications in the cloudv
4. Benefits, Weaknesses, Opportunities
and risks of SaaS adoption
4v1 SaaS Benefits
Access Anywhere:one of the advantages of the SaaS is Applications used over the network are accessible anywhere and anytime, typically with a browserv
Zero IT infrastructure: When delivering business applications via SaaS, the complexity of the underlying IT infrastructure is all handled SaaS vendorv
Software Maintenance: the SaaS vendors are responsible for any software updates; and these happen almost without the customer noticingv
Lower cost: the cost of using SaaS can be significantly lower compared with on premise software, because the clients only pays for what they usev
4v2 SaaS Weaknesses
Immature SaaS: Some feel that the SaaS model is still immature and has yet to prove itself worthy, and are waiting for it all to settle down before moving forwards even if their own infrastructure is far from perfectv
Ambiguous and complex pricing: Often providers offer different rates for their servicesv Usage costs, support and maintenance can be differentv There is no public standard tariff that all providers are required to follow itv So consumers are confusedv
Dependence on the SaaS provide:The customer is dependent on the service providerv The service will develop or end based on service provider’s actionsv Also If the SaaS provider were to go bankrupt and stopped providing services, the customer could experience problems in accessing data and therefore potentially in business continuityv
Dependence on the Internet: In most cases, the service cannot be used offlinev The service is available only over the Internetv
4v3 SaaS Opportunities
Cost saving: No purchase of software licenses, reduce staff IT, eliminating the cost of deployment and infrastructure leading to savings in the overall cost of organizationv
Strategic flexibility:SaaS adoption provides a great degree of flexibility regarding the utilization of easily scalable IT resourcesv This flexibility makes it easier for firms to respond to business-level volatility, because the SaaS provider handles fluctuations in IT workloadsv In this regard, a client company can leverage a SaaS vendor's capacity to adapt to changev
Focus on core competencies: SaaS adoption will also facilitate firms' refocusing on their core competencesv This refocusing is possible by
completely shifting responsibility for developing, testing, and maintaining the outsourced software application and the underlying infrastructure to the vendor [12]v
Access to specialized resources:SaaS clients benefit from economies of skills by leveraging the skills, resources, and capabilities that the service provider offersv These specialized capabilities (evgv, access to the latest technologies and IT related
Know-how) could not be generated internally if the application were delivered in-house via an on-premises model [12]v
4v4 SaaS Risks
Lack of control risk: When the SaaS goes down, business managers can find themselves feeling completely helpless because they suddenly have no visibility of the infrastructurev
Legal issues: There are legal risk include Governance, SLAs, service reliability and availability, etcv
Security risks: data protection and privacy are important concerns for nearly every organizationv Hosting data under another organization’s control is always a critical issue which requires stringent security policies employed by Cloud providersv For instance, financial organizations generally require compliance with regulations involving data integrity and privacy
v
Security and Privacy is multi-dimensional in nature and includes many attributes such as protecting confidentiality and privacy, data integrity and availability [15]vPerformance risks: Performance risks are the possibility that SaaS may not deliver the expected level of servicev Service Down time or slow it can be a huge economic losses inflicted to the organizationv
Economic risks:if the client wants to customize the application core, he needs to own itv Even if the client can use the standard core, he may want to build components on top of the core functionality (using APIs) to suit his needs with regard to integration and customizationv Higher-than-expected costs may thus arise from the additional or changing future requirementsv In addition, increasing costs may emerge from the hold-up, because vendor ownership of the application core provides the vendor with more future bargaining powerv This power enables him to increase prices, charge extra costs, or refuse to invest in backward-compatible interfaces for the client's customized codev
all customers at once, which implies a high value at risk [13]v
Integration risk: risk of problems related to the SaaS application's interoperability and integration with homegrown applications located on the client sidev Potential losses due to performance risks can be significant because the day-to-day operations will not be optimally supported [12]v
5. Analysis Methodology
To analyze the factors identified in the previous section, a questionnaire among 192, employees and managers of government agencies and private companies distributed that were the 65 questionnaires were answered with a successv Frequency distribution of respondents' profile in table 1 is shownv
Table 1: Frequency distribution of respondents' profile Characterietic Sample compoeition
Type of Organization
Governmental organizations 24(37%)
Private organizations 41(63%)
Roles
Organization manager 4(6%)
IT manager 15(23%)
Computer and IT engineer 36(56%)
R&D 8(12%)
Other Cases 2(3%)
Working experiences (Year)
1~3 9(14%)
3~5 19(29%)
5~10 29 (45%)
>10 8(12%)
We measured the validity by factor analysis test and reliability by Cronbach's alpha testv According to the results of factor analysis to test kmo = 0v7 and α = 0v8 for the alpha test has demonstrated high reliability and validityv The questionnaire is designed in likert spectrumv We evaluate the normal distribution of the data by the Kolmogorov – Smirnov testv So according to the test results, the values of significance level all components are less than 0/05, so the non-normal data distributionv Therefore, in this study the binomial test was done (Sign-level=0v05, cut point=3) by SPSS softwarev So the research hypothesis is as follow:
Hypotheses A: Understanding and knowledge of cloud computing and SaaSv
HA-1:Respondents' awareness of cloud computing is desirablev
HA-2:Respondents' awareness of SaaS is desirablev Due to the novelty of cloud computing, in this case
we determine cut point on 2
Table 2: The results of testing HAhypothesis (sigv level 0v05)
Binomial teet
Awareneee Group N Category Obeerved Prop. Teet Prop Exact Sig. (2-tailed) Reject/confirm the hypotheeie
Cloud Awareness
1 15 <= 2 v23 v50 v000
2 50 > 2 v77 Confirm
Total 65 1v00
SaaS Awareness
1 24 <= 2 v37 v50 v046
2 41 > 2 v63 Confirm
Total 65 1v00
According to table 2 the values of significance level HA-1 and HA-2is less than 0v05 and the frequency of
observations category (>2) is more, so they are confirmedv Thus, according to all frequency of observations, respondents have confirmed hypothesis Av
Hypotheses B: Respondents believe that the SaaS has many benefitsv
HB-1:The SaaS is accessible anywhere at any timev
HB-2: IT infrastructure is not needed for SaaS utilizationv
HB-3: SaaS utilization reduce software support and data management tasks dramaticallyv
Table 3: The results of testing HBhypothesis (sigv level 0v05)
Binomial teet
Benefite Group N Category Obeerved Prop. Teet Prop. Exact Sig. (2-tailed) Reject/confirm the hypotheeie
Access Anywhere
1 24 <= 3 v37 v50 v046
2 41 > 3 v63 Confirm
Total 65 1v00
Zero IT infrastruct ure
1 40 <= 3 v62 v50 v082
2 25 > 3 v38 Reject
Total 65 1v00
Software Maintenan ce
1 46 <= 3 v71 v50 v001 Reject
2 19 > 3 v29
Total 65 1v00
Lower cost 1 20 <= 3 v31 v50 .003
2 45 > 3 v69 Confirm
Total 65 1v00
According to table 3 the values of significance level HB-1 and HB-4 are less than 0v05 and the frequency of
observations category (>3) is more, so it is confirmedv The values of significance level HB-3 is
less than 0v05 but the frequency of observations category (<= 3) is more, so it is rejectedv The values of significance level HB-2 is more than 0v05, so it is
rejectedv Thus, According to all frequency of observations, respondents have rejected hypothesis Bv
Hypotheses C: Respondents believe that the SaaS has many Weaknessesv
Hc-1:SaaS still has not matured in Iranv
Hc-2:SaaS pricing is Ambiguous and complicatedv
Hc-3: SaaS utilization is leads to Dependency on the Providerv
Hc-4:cloud is Completely Dependent on the internetv
Table4: The results of testing HChypothesis (sigv level 0v05)
Binomial teet
Weakneeeee Group N Category Obeerved Prop. Teet Prop. Exact Sig. (2-tailed) Reject/confirm the hypotheeie
Immature SaaS
1 22 <= 3 v34 v50 v013
2 43 > 3 v66 Confirm
Total 65 1v00
complex pricing
1 39 <= 3 v60 v50 v136
2 26 > 3 v40 Reject
Total 65 1v00
Dependency on the provide
1 42 <= 3 v65 v50 v025
2 23 > 3 v35 Reject
Total 65 1v00
Dependency on the Internet
1 24 <= 3 v37 v50 v046
2 41 > 3 v63 Confirm
According to table 4 the values of significance level HC-1 and HC-4 are less than 0v05 and the frequency of
observations per category (>3) is more, so they are confirmedv The values of significance level HC-3 is
less than 0v05 but the frequency of observations category (<= 3) is more, so it is rejectedv The values of significance level HC-2 more than 0v05, so it is
rejectedv Thus, According to all frequency of observations, respondents have rejected hypothesis Cv
Hypotheses D: Respondents believe that SaaS adoption brings many opportunitiesv
HD-1:SaaS adoption is leads to saving the costv
HD-2: SaaS adoption provides a great degree of flexibilityv
HD-3: SaaS adoption will also facilitate firms' refocusing on their core competencesv
HD-4: SaaS adoption Brings Access to specialized resourcesv
Table 5: The results of testing HDhypothesis (sigv level 0v05)
Binomial teet
Opportunitiee Group N Category Obeerved Prop. Teet Prop. Exact Sig. (2-tailed) Reject/confirm the hypotheeie
Cost saving 1 23 <= 3 v35 v50 v025
2 42 > 3 v65 Confirm
Total 65 1v00
Strategic flexibility
1 24 <= 3 v52 v50 v804
2 41 > 3 v48 Reject
Total 65 1v00
Focus on
core competencies
1 57 <= 3 v88 v50 v000
2 8 > 3 v12 Reject
Total 65 1v00
Access to specialized resources
1 46 <= 3 v71 v50 v001
2 19 > 3 v29 Reject
Total 65 1v00
According to table 5 the values of significance level HD-1, is less than 0v05 and the frequency of
observations category (>3) is more, so it is confirmedv The values of significance level HD-3 and
HD-4 are less than 0v05 but the frequency of
observations per category (<= 3) is more, so they are rejectedv The values of significance level HD-2more
than 0v05, so it is rejectedv Thus, According to all frequency of observations, respondents have rejected hypothesis Dv
Hypotheses E: Respondents believe that SaaS adoption has many risksv
HE-1:SaaS adoption has many lack of control risksv
HE-2:SaaS adoption has many legal risksv
HE-3:SaaS adoption has many security risksv
HE-4:SaaS adoption has many Performance risksv
HE-5:SaaS adoption has many economic risksv
HE-6: SaaS adoption has Risks related to Internet resilience and bandwidthv
Table6: The results of testing HEhypothesis (sigv level 0v05)
Binomial teet
Rieke Group N Category Obeerved Prop. Teet Prop. Exact Sig. (2-tailed) Reject/confirm the hypotheeie
Lack of
control
1 24 <= 3 v37 v50 v046
2 41 > 3 v63 Confirm
Total 65 1v00
Legal issues
1 36 <= 3 v55 v50 v457
2 29 > 3 v45 Reject
Total 65 1v00
Security 1 17 <= 3 v26 v50 v000
2 48 > 3 v74 Confirm
Total 65 1v00
Performanc e
1 57 <= 3 v88 v50 v000
2 8 > 3 v12 Reject
Total 65 1v00
Economic 1 54 <= 3 v83 v50 v000
2 11 > 3 v17 Reject
Total 65 1v00
bandwidth 1 24 <= 3 v37 v50 v046
2 41 > 3 v63 Confirm
Total 65 1v00
Integration 1 23 <= 3 v35 v50 v025
2 42 > 3 v65 Confirm
Total 65 1v00
According to table 6 the values of significance level HE-1, HE-3, HE-6 and HE-7 are less than 0v05 and the
frequency of observations per category (>3) are more, so all is confirmedv So values of significance level HE-4 and HE-5 are less than 0v05 but the
frequency of observations per category (<= 3) are more, so they is rejectv The values of significance level HE-2 more than 0v05, so it is rejectedv Thus,
According to all frequency of observations, respondents have rejected hypothesis Ev
6. Discussion and conclusions
Software as a Service (SaaS) is a relatively new organizational application sourcing alternative, offering organizations the option to access applications via the Internetv We in study focuses on
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